Industry News

Four servicers agree to streamline California workouts

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Four companies that service 25 percent of outstanding subprime loans in California have agreed to streamline the loan modification process to allow some borrowers with adjustable-rate mortgages to avoid interest rate resets. California Gov. Arnold Schwarzenegger said a voluntary agreement with Countrywide Financial Corp., GMAC Mortgage, Litton Loan Servicing and HomeEq Servicing is modeled after a proposal put forward by Federal Deposit Insurance Corporation chief Sheila Bair. Bair, citing a report by Moody's Investor Services that servicers were engaging in workouts on less than 1 percent of troubled subprime loans, last month urged them to embark on a program of wholesale conversions of adjustable-rate mortgages into fixed-rate loans when borrowers are in danger of default. In an interview published in today's Wall Street Journal, U.S. Treasury Secretary Henry Paulson said he expects a "significantly bigger" number of mortgage defaults in 2008, and said he is encouraging servicers to...